What Does The Future Hold For Economic Development And Regeneration V2

The future for enterprise and small business

NORTH WEST LOCAL ECONOMIC ASSESSMENT MEETING:

Workshop on ‘What does the future hold for economic development and regeneration?’

Preston Town Hall, Preston PR1 2RLWednesday 21st July, 2010

Presented by Ged Mirfin – Chief Data Officer, BLNW

Centripetal Localism

Business ledCorporatism

CentrifugalLocalism

Municipal Corporatism

Different Models of Local Economic Partnerships

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Local Business Influence

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Local Business Influence

Clear demarcation between Nationally Delivered and Financed Services & Tax

Raising and Locally Delivered and Financed Services & Tax Raising.

National Priorities to be determined centrally but Local Priorities to be

funded by enhanced Local Tax Raising Powers provided the General Public

and Business can be persuaded politically. (Layfield Principle)

Creation of “Keiretsu” like Enterprise Partnerships with very high levels of close knit co-operation cooperation between manufacturers, suppliers,

distributors, banks and local government with active acquiescence

of trade unions and employer engagement and participation

Public Sector Dominated Private Enterprise

Partnerships. Business represented in an advisory

capacity. Invited/Nominated Private Sector Boards.

Creation of Powerful Civic Associations. Return to Civic

Improvement Model with Public Sector & Big Business Working in True Partnership

to 'park, pave, assize, market, gas & water and improve'.

Public Sector Prominence or Business Dominance?

A keiretsu is a grouping or family of affiliated companies that form a tight-knit alliance to work toward each other's mutual success. The keiretsu system is also based on an intimate partnership between government and businesses.

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Local Business Influence

National strategies will be decided and targets set and monitored centrally with little room for

interpretation locally. Local priorities and targets will be largely determined by budgetary constraints and political administrative regulation. Initiatives

will be agreed on the basis of satisficing rather than negotiated

settlement.

Business Support Strategies will reflect the needs of the “Keiretsu” . Funded

Apprenticeships and Specialist Training will be High Priority. Training Regimes are likely to reflect the needs of the Growth Businesses. Education and Training will become much more Business Focussed. There will be a much greater focus on identifying and backing winners at the

expense of poor performing cos.

Re-launch, Re-packaging, Re-branding, Re-positioning of

Existing Business Support Products and Services under

another name/guise because it is too difficult to dismantle existing policy programmes.

Local Business Support Policies tailored to fit local need. Business Support Products and Services will

reflect demand-pull from local businesses as well as local economic

need. Trade-offs will need to be made between the imperatives of business growth and town and neighbourhood

renewal

Enterprise Partnerships: Business Support or Supporting Business?

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Local Business Influence

Government will have to make some invidious choices about which high

growth geographies to support. This may result in Widening Performance Gaps between Affluent and Deprived Geographies . Disempowering Local Government may hasten decline in

areas where support from Local Enterprises is already weak.

Creative Destruction – Pursuing a High Growth Strategy is likely to hasten the demise of existing declining industrial

sectors. Continuous Change Management of a High Growth Enterprise Strategy on

the scale envisaged has not been attempted since the Victorian era. There are however lessons we can learn from

recent experience

Politicians are accountable to the Electorate. Big Business is not. The Representative Test is in

achieving Sustainable and Lasting Economic Development which

will bring prosperity to the greatest number.

Balancing the needs of Business and Society especially a Big Society will

require Politicians to become more Pro-Business even at the expense of Social Cohesion – some geographical areas will lose out and Business to exhibit

more Corporate Social Responsibility accepting limits to growth

Spatial Geography: Competition between LEPs will accelerate the performance gaps between High Growth and Low Growth Local

Economies

Observations on Growth – Lessons from BLNW Data

Public Sector Vulnerability

Public Sector Vulnerability: Sub-Regional View

Public Sector Vulnerability: Most Affected Local Authorities

Public Sector Vulnerability: Most Affected Towns

Start-Up Activity

Significant Growth in Turnover and Jobs will be extremely difficult to achieve within the life of a Single Parliament

from Start-Up Activity

Sales of more than £400k and employing more than 10 people

First 3 to 5 Years of Trading

1% of Start-Ups have Employed

>10 People

Total Jobs in sample – approx 2500

High Growth Geography - Sales

Manchester 52

Cheshire East 39

Cheshire West and Chester 36

Liverpool 33

Sefton 33

Trafford 30

Stockport 28

Warrington 25

Blackburn with Darwen 24

Salford 23

Bury 21

Oldham 21

Wigan 20

Wirral 20

Chorley 19

South Lakeland 19

St. Helens 19

Rochdale 17

Bolton 15

Preston 15

Top Twenty Local Authorities

MANCHESTER 108 ROCHDALE 14

LIVERPOOL 63 WIRRAL 14

PRESTON 33 SOUTHPORT 13

WARRINGTON 25 WIGAN 13

STOCKPORT 24 ST HELENS 12

BLACKBURN 21 CARLISLE 11

OLDHAM 18 ROSSENDALE 11

CHORLEY 16 BURY 10

BLACKPOOL 15 ALTRINCHAM 9

BOLTON 15 NORTHWICH 9

Top Twenty Towns & Cities

20/97

20/39

•Greater Manchester has the highest return 34%•Manchester (City) has 16%•Top 5 Performing Post Codes BB2 (Blackburn 13) BB4 (Rossendale 11) M19 (Manchester 11) PR7 (Chorley / Charnock Richard 11) M28 (Worsley 10)

• Twice as likely to emerge from a Prosperous area

• Non Deprivation Areas - 513 of which 168 are from “Prospering Suburbs”.

• Deprivation Areas – 198 • “Prospering Suburbs” account for 25% 0f all high

growth start ups and 33% of high growth start ups in in Non Deprivation Areas.

• Is Entrepreneurialism a middle class phenomenon?

• Is this accentuated by the current recession?

Entrepreneurialism is a Middle Class Phenomenon

High Growth In Prosperous Wards - Sales

•Manchester has the highest return with 62 companies•Stockport, Rossendale, Northwich and Warrington produce more than 90% of their growth companies from prosperous areas•OA Classification “Prospering Suburbs” are primary drivers for High Growth Companies

as a %ageof Total

MANCHESTER 62 57%LIVERPOOL 29 46%WARRINGTON 24 96%STOCKPORT 22 100%PRESTON 21 64%BLACKBURN 15 71%CHORLEY 13 81%BLACKPOOL 11 73%WIGAN 11 85%WIRRAL 11 79%ROSSENDALE 10 91%CARLISLE 9 82%NORTHWICH 9 100%OLDHAM 9 50%SOUTHPORT 9 69%

Top 15 Sales GrowthNon Deprivation areas

Typical Traits 172

Prospering Suburbs 168

Countryside 92

Blue Collar Communities 32

Constrained by Circumstances 22

City Living 20

Multicultural 5

Not Known 2

Output Area Classification

High Growth - Sales of £400k+ and Staff 10+

Even Geographical Spread - only 42 businessesEasier to grow in Cumbria 16% of high growth companies achieve more than £400k & 10 people, only 3% achieve this in Greater Manchester, 6% everywhere elseVast Majority turnover less than £1m

Total Jobs in sample – approx 2500

34

5 3

High Sales Growth (£5m+) Companies Employing more than 10

Employing – 445 with sales of £125m aprox

Even Geographical Spread of businessesVery Few Companies achieve this sizeAlthough Sales Volumes are good employment is predominantly in the 10 – 49 bracket

Business Activity Matrix - Start Up Companies and Growth*

< £90k £90-£400k £400k - £2,5m £2.5m+

100 - 250+ 0 0 0 2

50 - 99 0 2 0 7

10 - 49 11 13 29 6

0 - 9 1433 626 598 43

Annual Turnover

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•There are few companies that make the leap up the high growth curve!•Turnover and Number of Employees are mutually interdependent•Growing employee base beyond 9 is very difficult and requires turnover of more than £1.0m•From start up to high turnover and employment in a 3 year window is very rare

0.07% 0.32%

*Where Turnover Data Available (2,770 Businesses or 65% of Total)

75.20% 24.40%

The High Growth Programme

Some geographies have higher growth potential than others

Some sectors have higher growth potential than others

…the Digital & Creative Sector will become increasingly important but let’s not forget the importance of older more traditional sectors

(including retail!)

How dependent have we become on Financial Services?

…but don’t forget the importance of the Engineering & Aerospace industry in the

NW!

How much untapped high growth potential is there amongst older businesses?

51.65% of the Businesses on the High Growth Programme are >7 Years Old & 59.70% are >5

Years Old

The future is bright the future is SME!

94.67% of Businesses on High Growth Programme Employ <50 Staff

Business Support: BLNW Interventions

with High Growth Businesses

Can Local Enterprise Partnerships identify High Growth Companies?

Can they support them to the extent that they ought to be in order to generate the levels of growth and number of new jobs

that will grow the Private Sector to absorb Public Sector Job Losses?

Given that Growth in Turnover and Growth in Employment are not Mutually

Interdependent should this be an explicit aim of Policy?

Hunting Gazelles

Young (Late 20s/Early 30s), Highly Educated

Business Owners

Scientists and/or

Academics

Prominent Markings to look for:

IndependentBusinesses

Niche activities or Specialised Product

Offerings within Older or Traditional

Industries

High Technology Knowledge –Based

Businesses

Advanced Manufacturing using Precision

Technology

Entrepreneurial

Based on Specialist Industrial Parks &

Technology Centres

Newer Businesses do not have SIC

Codes

Opposite Ends Risk Spectrum 75%

Low/25% Very High Risk

Action Plan Themes: Intensively Assisted GazellesTheme Occurrences % Theme Occurrences %Sales & Marketing 18 12.68% Export 6 4.23%

Training, Skills & Workforce Development 16 11.27% Staffing, Recruitment & HR 4 2.82%

Supply Chain Membership & Network Access 15 10.56% Graduate Placement 3 2.11%R&D, Innovation & NPD 12 8.45% Environmental Directives 3 2.11%

Business Diagnostics, Benchmarking & Planning 12 8.45%

Knowledge Transfer Programme 2 1.41%

Raising Finance, Capital Expenditure & Debt Refinancing 10 7.04% IPR 2 1.41%

Leadership, Management & Business Coaching 8 5.63% Subsidiaries 1 0.70%Process Improvement, Efficient & Lean Manufacturing 8 5.63% Health & Safety 1 0.70%CRM & Database Management 7 4.93% IT 1 0.70%

New Market Entry & Market Research 6 4.23% Succession Planning 1 0.70%

New Premises, New Build & Business Relocation 6 4.23% Total 142 100.00%

BLNW Action Plan Statistics

The difference with Gazelles is not the type of question they ask it’s the complexity of the issue they face…

Category of Assistance

R&D, Innovation and NPD

Sales & Marketing

Training & Skills

New Machinery, Process Improvement, Retooling

Capital Expenditure

Relocation & New Premises

Export

Relationship Management, Networking, Membership Cluster Organizations/Networks

Gazelle Specific Example

Collaborating with local Higher Education Institution in Grant Funded R & D Knowledge Transfer Project

Market Scoping Research Project on Need for Specialist Footwear for those who suffer general foot discomfort in order to offer products into the mainstream market

Training of Specialist Staff working in the construction, manufacture and assembly of equipment in the Nuclear Industry

Improvement Production Processes in Specialist Marine Manufacturing Company producing products for the offshore oil extraction industry

Access to Finance for Relocation Precision Manufacturing Plant

Consolidation of Manufacturing Plant on Single Site Location including relocation Welsh Manufacturing Plant to North West

JV in Eastern Europe

Obtaining Membership of and Maximising Network Opportunities through the Northwest Aerospace Alliance

• Gazelles require complex kinds of support placing much higher levels of demand on Public Sector Agencies

• Gazelles are “Elite Businesses”. • Supporting them is resource intensive requiring

prioritisation at the expense of existing Business Sectors!

• Can We Afford To Be Doing This?• Can We Afford Not To?• Raises broader questions about the structure

of the UK Economy and the place of High Growth Companies within it?

Issues